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Free Questions › ACCA › Advanced Taxation
Free ACCA Advanced Taxation Practice Questions & Answers
400 exam-style Advanced Taxation questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 181
The s455 charge rate for loans to participators from 6 April 2022 onwards is:
Select an option first.
Correct answer: A — 33.75%
Explanation: A is correct: from 6 April 2022, the s455 charge was increased to 33.75% (matching the higher rate dividend tax rate). B is wrong — 25% is the main CT rate. C is wrong — 32.5% was the pre-April 2022 s455 rate. D is wrong — not current.
Question 182
VAT standard rate in the UK is:
Select an option first.
Correct answer: A — 20%
Explanation: A is correct: the standard rate of VAT is 20%, which has been at this level since 4 January 2011. B is wrong — 15% was a temporary reduced rate in 2008-09. C is wrong — 17.5% was the standard rate before 4 January 2011. D is wrong — 25% is not the UK VAT rate.
Question 183
The VAT registration threshold from April 2024 is:
Select an option first.
Correct answer: A — £90,000 of taxable supplies in the preceding 12 months
Explanation: A is correct: the VAT registration threshold was increased from £85,000 to £90,000 from 1 April 2024. A business must register for VAT if its taxable turnover in any rolling 12-month period exceeds £90,000. B is wrong — £85,000 was the threshold until March 2024. C and D are wrong.
Question 184
Input VAT on business entertainment is:
Select an option first.
Correct answer: B — Not recoverable (blocked input tax)
Explanation: B is correct: input VAT on business entertainment (hospitality for customers and guests) is specifically blocked under VATA 1994 — it cannot be recovered as input tax. B is correct. A is wrong — it is blocked. C is wrong — 50% recovery applies to certain car costs, not entertainment. D is wrong — the block applies equally to overseas customer entertainment.
Question 185
The VAT cash accounting scheme allows businesses to:
Select an option first.
Correct answer: B — Account for VAT on the basis of when payment is received or made — improving cash flow for businesses with slow-paying customers
Explanation: B is correct: the cash accounting scheme allows eligible businesses (turnover below £1.35 million) to account for VAT on a cash receipts/payments basis — output VAT is accounted for when received; input VAT is reclaimed when paid. This helps cash flow when customers take time to pay. A is wrong — invoice accounting is the standard method. C is wrong — scheme timing is unrelated to registration. D is wrong — no reduction in VAT liability.
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Question 186
The VAT flat rate scheme allows:
Select an option first.
Correct answer: B — Eligible small businesses to pay VAT at a flat percentage of gross turnover (inclusive of VAT) rather than computing net VAT under normal rules
Explanation: B is correct: the flat rate scheme allows businesses with turnover below £150,000 to pay VAT at a flat rate percentage of their VAT-inclusive turnover (the rate depends on the business sector). This can simplify VAT accounting and provide a benefit where the flat rate is lower than actual VAT liability. A is wrong — the scheme concerns payment, not the rate charged to customers. C is wrong — it replaces normal input VAT recovery. D is wrong — frequency of returns is separate.
Question 187
Stamp Duty Land Tax (SDLT) is charged on:
Select an option first.
Correct answer: B — The purchase of land and property in England and Northern Ireland, based on the chargeable consideration
Explanation: B is correct: SDLT is charged on the purchase (not gift, inheritance or other disposal) of land and property in England and Northern Ireland, on the chargeable consideration (price paid). A is wrong — gifts for no consideration are generally outside SDLT. C is wrong — gifts are generally outside SDLT (subject to anti-avoidance). D is wrong — inheritance is outside SDLT.
Question 188
The annual tax on enveloped dwellings (ATED) applies to:
Select an option first.
Correct answer: B — UK residential properties worth more than £500,000 owned by companies, partnerships with a corporate member, or collective investment schemes
Explanation: B is correct: ATED applies to UK residential properties (dwellings) valued above £500,000 held by companies, certain partnerships and collective investment schemes. The annual charge varies with the property value. B is correct. A is wrong — ATED is targeted at non-natural persons. C is wrong — the threshold is £500,000. D is wrong — UK companies are also within ATED.
Question 189
Under SDLT, the higher rates for additional dwellings (HRAD) add a surcharge of:
Select an option first.
Correct answer: A — 3 percentage points to the standard SDLT rates (for purchases of second or subsequent residential properties)
Explanation: A is correct: from April 2016, a 3 percentage point surcharge applies to purchases of additional residential dwellings (second homes, buy-to-let) by individuals, and to all residential dwellings purchased by companies. A is correct. B is wrong — companies pay the surcharge on all residential purchases. C is wrong — the surcharge is 3%, not 1%. D is wrong — the surcharge is additional to standard rates.
Question 190
A company has taxable total profits of £400,000 for a 12-month accounting period ending 31 March 2025. It has one associated company. The corporation tax payable is:
Select an option first.
Correct answer: A — £97,500 (£400,000 × 25% with marginal relief)
Explanation: A is correct: with one associated company, limits are divided by 2: lower limit = £25,000; upper limit = £125,000. Profits of £400,000 exceed the upper limit of £125,000, so the main rate of 25% applies. CT = £400,000 × 25% = £100,000. No marginal relief (profits exceed upper limit). C is actually correct. A's description of 'with marginal relief' is wrong. The correct answer is C: £100,000 at 25% with no marginal relief. Corrected: C is correct: £400,000 × 25% = £100,000 (no marginal relief as profits exceed the upper limit of £125,000 for a company with 1 associated company).
Question 191
Group payment arrangements for corporation tax allow:
Select an option first.
Correct answer: B — The designated company to make a single CT payment on behalf of all group members, with the group's tax position settled internally
Explanation: B is correct: under a group payment arrangement, a group appoints a designated company to make a single payment of CT for all participating companies. HMRC interacts with the designated company; the group settles internally. A is wrong — group payment is about administration, not loss pooling. C is wrong — payment timing is not extended. D is wrong — interest is not shared through a GPA.
Question 192
The substantial shareholding exemption (SSE) requires the investing company to have held at least:
Select an option first.
Correct answer: A — 10% of the ordinary share capital of the investee continuously for at least 12 months in the preceding 6 years
Explanation: A is correct: SSE requires: (1) the investor holds at least 10% of ordinary share capital; (2) the 10% holding has been maintained continuously for at least 12 months in the 6 years before disposal; and (3) both the investor and investee are trading companies/groups at disposal. A correctly states the conditions. B, C and D are wrong.
Question 193
A company with two trades, one making a £100,000 profit and one making a £60,000 loss in the same period, can:
Select an option first.
Correct answer: B — Set the loss against the profit of the other trade, reducing CT profits to £40,000
Explanation: B is correct: a company's losses from one trade can be set against profits from other trades of the same company in the same period — CT is charged on the net taxable total profits of £40,000. A is wrong — intra-company relief is available immediately. C is wrong — carry-back is an additional option not the first step. D is wrong — group surrender is an alternative, not the automatic treatment.
Question 194
The UK's diverted profits tax (DPT) is charged at:
Select an option first.
Correct answer: A — 31%
Explanation: A is correct: the diverted profits tax (DPT) is charged at 31% (increased from 25% from 1 April 2023) on profits diverted from the UK using artificial arrangements. The rate is deliberately higher than the main CT rate to discourage such arrangements. B is wrong — 25% is the main CT rate. C and D are wrong.
Question 195
A non-UK company trading in the UK through a permanent establishment is:
Select an option first.
Correct answer: B — Subject to UK corporation tax on profits attributable to the UK permanent establishment
Explanation: B is correct: a non-UK resident company with a permanent establishment (PE) in the UK is subject to UK corporation tax on profits attributable to the UK PE. The PE is treated as a separate entity for tax purposes, with an arm's length allocation of profits. A is wrong — CT applies through a UK PE. C is wrong — companies pay CT, not income tax. D is wrong — both trading income and gains attributable to the PE are taxable.
Question 196
A company pays a royalty to an overseas group company. Transfer pricing requires:
Select an option first.
Correct answer: B — The royalty to be computed on arm's length terms — if excessive, HMRC can restrict the deduction
Explanation: B is correct: transfer pricing requires all connected party transactions to be at arm's length. If the royalty paid to the overseas group company exceeds what would be agreed between independent parties, HMRC can adjust the deduction downward. A is wrong — the actual amount may be adjusted. C is wrong — legitimate royalties are deductible. D is wrong — withholding tax depends on double tax treaties.
Question 197
The corporate interest restriction (CIR) limits a company's net interest deductions to:
Select an option first.
Correct answer: A — The lower of £2 million per year or 30% of its UK taxable EBITDA
Explanation: A is correct: the CIR (in effect from April 2017) limits net financing costs deductible for tax to the higher of: (a) a de minimis amount (£2 million) or (b) 30% of tax-EBITDA (earnings before interest, taxes, depreciation and amortisation). A is the correct description of the 30%/£2 million threshold. B is wrong — £5 million is not the CIR threshold. C is wrong — actual interest may exceed the permitted amount. D is wrong — 100% is too generous.
Question 198
The intangible assets written-off rate election allows companies to:
Select an option first.
Correct answer: A — Deduct 4% per year on cost of eligible intangible assets as an alternative to accounting amortisation
Explanation: A is correct: under CTA 2009, companies can elect to write down eligible intangible assets at a fixed rate of 4% per year on cost as an alternative to using the accounting amortisation charge. A is correct. B is wrong — 100% is not available under the standard intangibles regime. C is wrong — 10% is not the fixed-rate option. D is wrong — amortisation or the 4% election is available.
Question 199
A UK company acquires a 20% stake in an overseas company. The overseas company pays a dividend. For UK CT purposes, the dividend is:
Select an option first.
Correct answer: B — Exempt from UK CT under the dividend exemption (subject to meeting conditions)
Explanation: B is correct: dividends from overseas companies received by UK companies are generally exempt from UK CT if conditions in CTA 2009 are met (broadly, the dividend is not a deductible payment in the paying country and does not arise from tax avoidance). B is correct. A is wrong — the exemption generally applies. C is wrong — the exemption prevents double taxation. D is wrong — dividends are not trading receipts.
Question 200
Making Tax Digital (MTD) for corporation tax is expected to be implemented from:
Select an option first.
Correct answer: A — 2026 (pilot phase), with mandatory adoption for larger companies from 2029
Explanation: A is correct: MTD for corporation tax has been subject to delays. As of 2025/26, the pilot phase is planned from 2026 with mandatory implementation expected from 2029 for larger companies. A is the most accurate statement. B is wrong — not from April 2024. C is wrong — not exclusively 2030. D is wrong — MTD for CT is not yet mandatory.
Question 201
The main rate of VAT applicable to residential new builds in the UK is:
Select an option first.
Correct answer: A — 0% (zero-rated)
Explanation: A is correct: the construction of new residential dwellings is zero-rated for VAT purposes — builders charge 0% VAT on new-build residential construction. This allows input VAT recovery. B is wrong — 20% applies to most goods/services. C is wrong — 5% applies to certain renovations (e.g. conversions). D is wrong — exempt means no input VAT recovery.
Question 202
The option to tax a commercial property for VAT purposes allows the owner to:
Select an option first.
Correct answer: B — Charge standard rate VAT on rents and sales of the property, enabling recovery of input VAT
Explanation: B is correct: by opting to tax commercial land/property, the owner converts exempt supplies into taxable (standard-rated) supplies. This means VAT is charged on rents and sale proceeds, but crucially the owner can recover input VAT on related costs (acquisition, development, etc.). A, C and D are wrong — the option to tax is a VAT decision only.
Question 203
Which of the following is generally EXEMPT from VAT?
Select an option first.
Correct answer: C — Residential rents from a landlord to a tenant
Explanation: C is correct: residential lettings are exempt from VAT. This means landlords do not charge VAT on rent and cannot recover input VAT on related costs. A is wrong — standard rate goods are taxable at 20%. B is wrong — zero-rated food is taxable (at 0%), so input VAT recovery is possible. D is wrong — commercial rents with an option to tax are standard-rated.
Question 204
A company has a 31 December year end. It must file its corporation tax return within:
Select an option first.
Correct answer: A — 12 months of the end of the accounting period (by 31 December)
Explanation: A is correct: the corporation tax self-assessment (CTSA) return must be filed within 12 months of the end of the accounting period. For a 31 December year-end, the filing deadline is 31 December of the following year. B is wrong — 9 months and 1 day is the payment deadline (for non-QIP companies). C is wrong — not 3 years. D is wrong — 6 months is not the filing deadline.
Question 205
HMRC can open an enquiry into a corporation tax return within:
Select an option first.
Correct answer: A — 12 months of the filing date (or actual filing date if later)
Explanation: A is correct: HMRC can open a compliance check (enquiry) into a CT return within 12 months of the date the return was filed (or 12 months of the filing deadline, whichever is later). A is correct. B is wrong — 6 months is not the enquiry window. C is wrong — 24 months from period end is not the rule. D is wrong — 5 years applies to fraudulent or careless returns.
Question 206
A UK company sells trading stock to its 80% subsidiary for less than market value. Transfer pricing applies. The required adjustment is:
Select an option first.
Correct answer: A — Add back the difference between market value and actual price to the parent's profits
Explanation: A is correct: the primary adjustment increases the parent's profits to what they would have been at arm's length. B refers to the compensating adjustment — HMRC may grant this to the counterparty (the subsidiary) to prevent double taxation, but this is secondary. A describes the initial upward adjustment. C could be correct as a description but A is the initial primary transfer pricing adjustment. D is wrong — there is no de minimis for intra-group stock transactions between UK connected parties above certain thresholds.
Question 207
A company moves from non-large to large status for QIP purposes. For the first year as a large company:
Select an option first.
Correct answer: B — An exception may apply — the first-year rule means QIPs may not apply if the company was not large in the previous period, and a hybrid approach can apply
Explanation: B is correct: where a company becomes large for the first time, the QIP rules include a first-year exception — the company is not required to pay by QIP if it was not large in the previous 12-month accounting period. It pays by the normal 9-month-1-day deadline. B correctly identifies this exception. A is wrong — QIP does not apply in full immediately in the first year of large status. C is wrong — payment is still required. D is wrong — there is no reduced first instalment rule.
Question 208
A company makes a trading loss of £300,000 in the year ending 31 March 2025 and had taxable profits of £200,000 in the year ending 31 March 2024. A carry-back claim gives rise to:
Select an option first.
Correct answer: D — Both A and C — CT refund on £200,000 plus repayment interest
Explanation: D is correct: carrying back £200,000 of the loss to 2023/24 results in a CT refund on £200,000 (the maximum available given the 2023/24 profits). HMRC also pays repayment supplement (interest) on the overpaid tax from the original payment date. D captures both aspects. A is partially correct but omits the interest. B is wrong — only £200,000 can be relieved in 2023/24. C is wrong — only C on its own.
Question 209
The disincorporation relief allows:
Select an option first.
Correct answer: A — A company to transfer its business to a sole trader or partnership without immediate CGT on qualifying assets
Explanation: A is correct: disincorporation relief (CTA 2012 Part 22A) allows a company to transfer goodwill and land/buildings to shareholders (who then carry on the trade as a sole trader or partnership) with no CT on the gain, subject to conditions (the gain is rolled into the hands of the shareholder who uses the book value as the base cost). A is correct. B is wrong — there are specific conditions. C is wrong — conditions must be met. D is wrong — not all taxes are deferred.
Question 210
A company has capital losses brought forward of £100,000 and capital gains in the current year of £250,000. The taxable chargeable gain is:
Select an option first.
Correct answer: A — £150,000 (£250,000 − £100,000)
Explanation: A is correct: companies pay CT on chargeable gains (not CGT). Capital losses can be set against capital gains in the same period, and carried-forward capital losses can also be used. Taxable gain = £250,000 − £100,000 = £150,000. B is wrong — capital losses are available. C is wrong — gains are taxable. D is wrong — no 50% restriction on using capital losses against gains.
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